21.co Enhances Wrapped Bitcoin Transparency with Chainlink Integration
21.co, the parent organization of the asset management firm 21Shares, has officially implemented Chainlink’s Proof of Reserve (PoR) on both Ethereum and Solana mainnets to enhance the transparency of its wrapped Bitcoin product, 21BTC. This development was communicated in a statement released on September 23.
Real-Time Reserve Verification via Chainlink
The integration will utilize Chainlink’s Proof of Reserve through the company’s digital asset platform, Onyx. This strategic move automates real-time reserve validations, ensuring the secure minting of 21BTC.
Benefits of Decentralized Oversight
According to the firm, this integration promotes decentralized oversight and transparency, ultimately benefiting users and bolstering confidence in the token. Users will now have the capability to independently verify the asset collateralization in real time.
21BTC was initially launched on the Solana network in May and expanded to the Ethereum network in September. The token is fully backed by Bitcoin reserves at a 1:1 ratio, securely maintained in cold storage.
Insights from Chainlink Labs
Johann Eid, Chief Business Officer at Chainlink Labs, remarked:
“Proof of Reserve’s role in enabling a secure minting function is a key step to creating a reliable framework that allows for the tokenization of trillions of dollars in value.”
Challenges Faced by Coinbase’s Wrapped Bitcoin
While 21.co is making strides in transparency for 21BTC, its competitor, Coinbase’s wrapped Bitcoin (cbBTC), is encountering significant scrutiny.
Criticism Over Lack of Transparency
On September 23, 0xngmi, founder of DeFillama, criticized cbBTC for its inadequate transparency. He stated:
“Almost every single bridge (including WBTC) provides a Proof of Reserves so you can check that the issued coins are backed. But Coinbase doesn’t, cbBTC is way below the standard in terms of transparency.”
Concerns from Coinbase’s Legal Team
In light of these concerns, Coinbase’s Chief Legal Officer, Paul Grewal, was prompted to clarify the terms of service related to cbBTC. Users on social media expressed worries over the exchange’s potential inability to fully reimburse lost Bitcoin due to malicious acts or unforeseen events.
Grewal explained that Coinbase’s liability is solely for the Bitcoin that is lost, not for any losses incurred from trades or leveraged positions. He stated:
“It’s a limitation on liability that’s pretty basic: we aren’t liable for more than the BTC we lose. This language also makes clear the custodial relationship.”
Growing Popularity of cbBTC
Despite the criticisms, cbBTC has gained a notable following, with nearly 3,000 tokens in circulation within just two weeks of its launch. The token has quickly ascended to become the third-largest wrapped Bitcoin token, boasting a market capitalization of around $170 billion and exceeding $1 billion in trading volume over the last 24 hours, according to data from Dune Analytics.
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